'Effective incentive program': Brandon exploring change to hotel tax to improve revenue

The accommodation tax for hotels and motels in Brandon could soon be changing, becoming more in line with the rest of the province.

Last week, Brandon city council heard proposed changes to the tax – which is currently set at a $3.00 flat rate per night.

The change would see the elimination of the $3.00 rate and replace it with a five per cent rate per room per night.

"The accommodation tax reserve has proven to be an effective incentive program, providing almost $3 million in grant funding for events that have generated over 140,000 overnight stays in Brandon and capital improvements for some of Brandon's event hosting venues," said Sandy Trudel, the director of Economic Development Brandon, at city council last Monday.

The tax was first implemented in 2011, and money from the tax has been sent into two accounts – a large event reserve, which Trudel said can be used for events like the Brier and a regular spending account.

With the current tax rate, Trudel said there is an average of $835,000 going out of the regular spending account, but only $740,000 is coming in.

"There's about $100,000 going out of the accommodation tax reserve compared to what's coming in. So definitely running a deficit there."

Before proposing the five per cent rate, Trudel said research was done to determine what other jurisdictions are doing, and they learned Brandon was the only place in Manitoba not doing the five per cent rate.

Trudel said while the flat-rate fee was easy to calculate, it has its downfalls as it doesn't keep pace with inflation.

She also noted the rate would not apply to short-term rentals as the current city bylaw states rentals with less than four rooms do not charge the rate. Trudel said the majority of short-term rentals have less than four rooms

Along with the rate change, Trudel proposed a cap of $500,000 be applied to the large event reserve and a one-time $250 credit for affected businesses to help with the transition.

Brandon's council voted unanimously on the first reading. It still has to pass second and third readings and if it is approved, it will go into effect on July 1.

While the president and CEO of the Manitoba Hotel Association agrees with the end goal of changing the tax, which is bringing more people to stay in Brandon and help the hotel industry, he doesn't think now is the time to increase the tax.

"Our sector was hit very, very hard during the pandemic. It wasn't that long ago, just about two years ago where occupancy rates at hotels were standing at less than 25 per cent," said Michael Jace. "Our sector is recovering, but we don't think this is the right time to bring in a new tax on a sector that was hit so hard."

Juce added if this change goes forward, he would also like to see it applied to short-term rentals – which would require another bylaw change – as he feels hotels and motels should be on a level playing field.

"Our members aren't afraid of competition; they compete with each for business every day. But it's pretty tough to compete against someone who's got a five per cent head start cost-wise each day."